The Institutional Foundations of Public Policy in Argentina. By Pablo Spiller and Mariano Tommasi. New York: Cambridge University Press,

2007. Pp. 237. $91.00 cloth.

INTRODUCTION

The downturn of the Argentine economy in the late 1990s, which culminated in the collapse of the constitutional government and of monetary convertibility in December 2001, triggered an intense debate in local and international media, as well as in multilateral financial institutions and academic, professional, and financial circles.1 The main topics of discusI would like to acknowledge the material support provided by the Universidad de Buenos Aires and the Instituto Di Tella in the preparation of this essay.

sion were the strengths and weaknesses of the recently deceased regime, the causes of what was publicly recognized as the deepest crisis in Argentine history, and who was responsible for the worst worldwide default in international payments.2 However, other major issues more relevant for this review essay were also considered: (1) the prospect that the economic recovery experienced by Argentina since the second quarter of 2002 might end in another crisis; (2) whether Argentine economic development should have avoided past mistakes and followed the Australian model;

(3) the impact of the quality of political institutions on public policies and hence on economic development; and (4) the nature and caliber of national entrepreneurship vis-à-vis Argentina’s past experience and current need to turn a new page.

To what extent have recent scholarly monographs about Argentina’s economic development addressed these concerns? Who has participated in these discussions? Which theoretical and methodological approaches have been used and why? What are the strengths and weaknesses of these works? Have they left unanswered any issues of the public policy agenda mentioned previously? If this has happened, how can these omissions be explained? In light of these questions, this review will use an issueoriented approach to discuss some of the results of renewed scholarly interest in Argentine economic stabilization and development.

THE PATTERN OF LONG-TERM OSCILLATIONS OF THE ECONOMY

Many scholars and analysts have long followed two standard tracks to examine Argentina’s thwarted efforts to become a developed nation.

First, they have argued that Argentina is the most cultured and advanced Latin American country, which used to have a thriving middle class and a highly educated population. Second, they have stated that, partly because of its rich resources and human capital, Argentina had one of the highest rates of gross domestic product per capita in the world by 1930, and its economic performance compared quite well with that of other recent settlement nations such as the United States, Australia, and Canada.3 tina,” Boletín Informativo Techint 310 (May–August 2002): 81–119. These assessments were published as the Argentine economy was beginning to recover from the crisis.

Amorrortu, 1970); Gerardo Dellapaolera and Alan Taylor, Straining at the Anchor: The Argentine Currency Board and the Search for Macroeconomic Stability, 1880–1935 (Chicago: University of Chicago Press, 2001); and A New Economic History of Argentina (Cambridge: Cambridge University Press, 2003).

digm in 1970, which the Argentine economist Marcelo Diamand in turn refined in the early 1980s.5 This stop-and-go model went into oblivion until Argentina’s latest economic crisis. In October 2003, a leading spokesman in the local press for orthodox economic liberalism called for an end to economic volatility and maintained that, though the current situation differed from that of prior decades, the economy retained its past unsteady course.6 This commentary recalled Diamand’s more sophisticated work on Argentina’s stop-and-go cycles. On the other hand, with the benefit of hindsight and a less sanguine view, the former Central Bank president González Fraga asserted in 2006 that Argentine growth rates since early 2002 were surpassed only in the belle epoque and ventured that perhaps the country was about to leave behind “the high volatility syndrome that characterized [it] since the mid-1960s.”7 To some extent, these issues and those mentioned by MacLachlan are present throughout the studies of Cortés Conde and Llach and Gerchunoff. Expanding on publications from the 1990s,8 Cortés Conde analyzes the evolution of Argentina’s economy and economic policies from 1880 to 1990 with a neoclassical outlook, using statistical data mainly from governmental sources. At the start of a rather brief introduction, Cortés Conde raises the point that Argentina’s “frustrated” growth and overall economic performance have been “bewildering.” On the one hand, he compares the long-term growth of Argentina and major Western European countries using data published by Angus Maddison in 2003.9 On the other hand, he follows Díaz Alejandro in contrasting Argentina’s economic performance before and after 1930, and its differences vis-à-vis more successful settlement countries, such as Australia, Canada, and the United States.

Cortés Conde explains why Argentina’s economy stagnated after 1930, declining to such an extent that, by the end of the century, it had been overtaken not only by advanced countries but also by Mexico and Brazil.

9. Angus Maddison, The World Economy: Historical Statistics (Paris: Organisation for Economic Co-operation and Development Development Centre, 2003).

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UNDER THE SHADOW OF A FRUSTRATED ALTERNATIVE COURSE

In December 2003, a high-ranking official from Minister of Economy Roberto Lavagna’s team remarked to a local reporter that Argentina should imitate the successful economic development experiences of Canada and Australia.11 This statement was remarkable on two counts, above all because, though made after the collapse of the liberalization policies of the 1990s, the countries taken as references for Argentina’s future suggested that the government did not wish to return to the radical state intervention and economic deadlock of previous decades. As well, this statement called to mind three facts raised in earlier debates: (1) that Argentina, Canada, and Australia were recent settlement regions endowed with identical productive resources; (2) that each had an open economy until the 1920s, and Argentina had the best economic performance of the three; and (3) that Australia and Canada had thereafter taken the lead because of different decisions that led them to higher, more equitable, and sustained rates of economic growth.12 The comparison between Australia and Argentina began in the nineteenth century, gained currency in the 1970s, and was then enriched with the addition of Canada. At the time, debate on comparative economic development aroused mainly scholarly interest. Only Díaz Alejandro, in an implicit call for policy change, contended that Argentina had fallen behind Australia and other recent settlement nations when the openeconomy paradigm was abandoned after 1945. Later, in the mid-1980s, the Australian historians Tim Duncan and John Fogarty would treat the lessons that their country should learn from Argentina’s experience, a line of analysis taken more recently by MacLachlan (xiii).13 Gerchunoff and Fajgelbaum reexamine and compare Argentine and Australian economic growth between 1884 and 2004. In this, they assume that there is no universal theory in this field and that, though difficult, comparative history is feasible if it does not rely on the dominant and trendy use of cross-section analysis and econometric regressions. Their explicit aim is to explain why Argentina’s pre-1930 prospects of matching Australia’s economic performance and status never materialized, and

again and give timely relevance to the application of institutional analysis to the Argentine case.15 Building on Douglass North’s seminal work, this approach has long been used to account for Argentina’s economic growth and performance.

In calling for Argentine reconstruction in the late 1980s, Llach maintained that the main reason for economic stagnation was the loss of credible institutions and social contracts.16 In the 1990s, Kathryn Sikkink combined institutional and comparative historical analyses of the state to contrast the failure of Argentine development with Brazil’s success in the mids.17 The most substantial and still-undebated effort along these lines by neoclassic economic historians is Dellapaolera and Taylor’s study of monetary, exchange, and banking policies in Argentina during the goldstandard regime (Straining at the Anchor), which prevailed from the late nineteenth century to the early 1930s.

Spiller and Tommasi expand this initiative by developing a general theoretical model that combines institutional analysis, positive political theory, Oliver Williamson’s transaction costs theory, and the theory of repeated games to explain how and why public policies can impair political stability and sustained development. They apply this model to Argentina, making it an empirical case study with which to examine other countries (8–9). Beginning with the failure of technocratic policy and institutional reforms in the 1990s, as well as the collapse of December 2001, they examine international trade negotiations, the reform of the pension system, and the privatization and regulation of public utility services to argue that weak political foundations led to inconsistent and low-quality public policies, which are the basic cause of permanent economic problems. Spiller and Tommasi’s concluding remarks are less compelling. Only their sober reminder about the dangers of technocratic approaches to policy making and institutional reform, and their doubts about the changes that would provide a way out for Argentina deserve mention (209–210).

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